Nevada County Bank v. Sullivan

• Decision Date: 07 February 1916
• Docket Number: 167
• Citation: 183 S.W. 169,122 Ark. 235
• Parties: NEVADA COUNTY BANK v. SULLIVAN
• Court: Arkansas Supreme Court

183 S.W. 169

122 Ark. 235

NEVADA COUNTY BANK v. SULLIVAN

No. 167

Supreme Court of Arkansas

February 7, 1916

Appeal from Nevada Chancery Court; J. D. Shaver, Chancellor reversed.

Decree modified and cause remanded.

Horace E. Rouse, for appellant.

1. The delay was inexcusable and the damages were liquidated at $ 10 per day. Where parties by the terms of their agreement expressly provide whether the damages shall be liquidated or unliquidated, they will be so construed by the courts. 13 Cyc. 94, and note 35; 56 N.E. 892; 14 App. D. C. 180; 183 U.S. 662, 46 L.Ed. 378; 183 U.S. 661; 20 N.E. 504. The contract says liquidated damages and the intention of the parties govern; 30 S.W. 560.

2. Appellant was entitled to the cost of correcting defects in the cornice. 97 Ark. 278; 64 Id. 34. Also, to the saving in hardware and the cost of correcting the stone. 97 Ark. 278. There was no waiver of the full amount of the liquidated damages. Money paid by mistake in ignorance of the facts may be recovered. 102 Ark. 159, 160. Appellant could have paid the entire contract price without waiving any rights, and then sued for damages for the delay. 114 N.Y.S 1084.

3. The damages were liquidated; not a penalty. 14 Ark. 329; 56 Id. 384; 72 Id. 524; 14 Id. 315 327-8; 1 Suth. on Dam. (3 ed.), § 291, p. 761; 38 N.E 1061; 13 Cyc. 98, 99; 69 Ark. 118; 110 Va. 358; 66 S.E. 46; 54 Ark. 340. It was unnecessary to prove the actual damages. 57 Ark. 168; 46 L.Ed. 366; 121 F. 609; Ib. 617, 618. The word "sole" in 104 Ark. 16, means only or exclusively. 11 App. D. C. 358, 369, 373; 8 Words & Phr., 6343. The rule as to the rental value of the building being the measure of damages does not apply here. 104 Ark. 9-16. The decree is erroneous and should be reversed and judgment entered here for the proper amount.

McRae & Tompkins, for appellee.

1. The delay was excusable as appellee used due diligence in getting the stone specified. 25 S.W. 1122.

2. Nothing should be allowed for alleged defects of cornice; saving in hardware or stone setting, but appellee should be allowed for extras.

3. Liquidated damages may be defined to be a fixed sum as compensation stipulated by the parties as the amount of damages for a breach and in lieu of actual damages. A penalty is a sum to be paid or forfeited upon nonperformance of a contract, its purpose being to insure performance rather than compensation for the breach. Courts do not lay down any general rule which will decide each case as presented, each case standing upon its own facts. It is, however, the tendency of courts to regard stipulations for damages as of the nature of a penalty rather than as liquidated damages in doubtful cases, as by doing so compensatory damages may be allowed and justice sustained. 13 Cyc. 94; 183 U.S. 642; 20 N.E. 504; 104 Ark. 9-16; 73 Id. 432; 48 Pa.St. 450; 92 Ark. 545; 69 Id. 114; 14 Id. 329; 56 Id. 384; 72 Id. 524; 57 Id. 168; 112 Id. 133; 55 N.E. 398; 38 Id. 1061; 66 S.E. 46; 160 S.W. 311; 128 N.C. 69; 84 N.W. 490; 13 So. Dak. 530; 19 A. 274; 45 N.W. 472; 32 S.W. 24; 72 Mo.App. 673; 108 Am. St. 55; 29 Neb. 385, etc.; 72 Ark. 529; 73 Ark. 436; 106 Ark. 279.

OPINION

SMITH, J.

On May 1, 1912, appellee entered into a written contract with the building committee of the Nevada County Bank by which he agreed to tear down and clear away the debris of its old building and construct, according to plans and specifications therefor, a new two-story brick building for the sum of $ 10,000, payable on estimates of the architect every two weeks in such sum as would not exceed 90 per cent of the value of labor and material furnished since the last preceding estimate, except that the final estimate should be for the balance due under the contract.

The contract provided that the building should be completed on or before August 15, 1912, and contained the following provision:

"And the contractor agrees to pay to the owner the sum of $ 10 per day as liquidated damages for each and every day which shall elapse between the time of completion and the time of actual completion."

The building was not completed within contract time, the lower floor not being completed and accepted until December 15 1912, and the upper floor was not entirely completed until about February 15, 1913.

During the progress of the building certain extra work was ordered and after the completion of the building, a controversy arose over the cornice of the building and damages were claimed against appellees for defective work alleged to have resulted from the failure to follow the plans and directions of the architect. The parties undertook to adjust their differences and each made the other a proposition for a settlement, but each proposition was rejected. Whereupon appellee commenced suit for the balance which he alleged was due him, and sought to enforce a lien on the building to secure this sum.

As has been said, only the first floor of the building was ready for occupancy by December 15, at which time appellee wrote the following letter:

"Prescott, Ark., December 14, 1912.

"Building Committee Nevada County Bank, Prescott, Ark.

"Gentlemen: You may occupy the first floor of the bank building being erected by me under contract with you, without such occupancy in any way being considered an acceptance of the job or a waiver of any of the terms and provisions of my contract with you.

"Yours truly,

"J. A. Sullivan."

Upon receipt of this letter, appellant occupied the lower floor of the building, but we do not understand the proof to show that appellant would have had tenants ready to move into and occupy the offices on the second floor. Upon the contrary, the proof appears to be that even now some of those rooms are unoccupied. There was conflicting evidence upon the question of responsibility for the delay in the completion of the building, but the chancellor found that issue in favor of appellant. And there was also conflicting evidence upon the question of extra work and defective work, and we think the chancellor's finding on those questions is not against the preponderance of the evidence.

The important question in the case is whether the provision for the payment of $ 10 for each day's delay was a stipulation for a penalty or an agreement for liquidated damages. The contract allowed about three and one-half months for the erection of the building, and a contractor of much experience testified that sixty days would ordinarily have been sufficient time for the erection of the building where reasonable diligence was used in pushing the work. It was shown on behalf of appellant that its old building was torn down and carted off, and that the bank moved into the general mercantile store of a Mr. Hamilton across the street, where a space of about 8x12 or 14 feet was furnished, and for which a charge of $ 10 per month was made. Mr. Hamilton permitted this use of his store only until the time when it had been represented the bank building would be completed, after which time he demanded for his own use this space, whereupon the officers of the bank moved into a part of the building used by Mr. Hamilton as an office, and shared there with Hamilton a standing desk from which the bank's business was transacted. There was no provision for keeping cash except in a cash drawer, and the bulk of the money was kept in the vaults of a competitive bank, while a part of the books were kept in a warehouse, and others in the competitive bank, and the remainder in their own safe on the street, and that other things and valuable papers were kept in the vaults of the competitive bank, to which place they were required to go when any of them were needed. It was also shown that $ 8,000 had been borrowed from a bank in Little Rock to be used in paying for this building, and under the loan contract this money could be used for no other purpose, and was kept on deposit with the bank from which it had been borrowed, during all of which time interest was being paid on it at the rate of 6 per cent. per annum. It was shown that there was much expense in moving and removing from Hamilton's stores as well as inconvenience and annoyance, during which time appellee was being prodded to complete the building. The cashier of appellant bank testified that he had no facilities for transacting the bank's business, that he lost some of the records temporarily, and that there was constant annoyance in keeping up with the records because of the lack of proper places to put them, and that there was no way to measure the annoyance and trouble of having no facilities for the transaction of the bank's business, and that this condition spoiled his business and ruined his collections for that fall, and that $ 10 per day would not, and did not cover the actual loss sustained by the bank by reason of being kept out of their building. That the fall of the year is the season for general collections and the acquisition of new depositors, and that there were deposits which the bank failed to get because of its lack of facilities.

In answer to all of this, it is insisted that appellee is not responsible for appellant's failure to properly equip itself for business, and that if its loans were not paid, the interest continued to run, and that the rental value of the building was the measure of the damages.

The court found that appellee complied with his contract except for the delay, and that he was entitled to credit for the extras claimed, but declared the stipulation herein set out to be a penalty and unenforceable, and that it was placed in the contract to insure performance, and not for compensation that the damages are easy of ascertainment, and are measured by the rental value of the building, and fixed appellant's damages for the delay from ...